Trading with Focus – Seven Years of Abbie Cornish, the market oracle

It was the year 2001.

The original tech boom had severely dented market confidence and destroyed many a speculative trader well before a couple of airplanes botched their landings in NYC (it is definitely not ‘too soon’, read a paper!) and destroyed the confidence of everyone else.

Once the literal dust settled, it appeared that the markets were in recovery mode and punters were cheering the rebound. “Yay, it’s a rebound, get long and hold”, they said.

Around the same time a fresh faced young actress (that’s what female actors were called at the time) named Abbie Cornish first popped up on the multi-cultural channel (that’s what SBS was called at the time) in a hilarious satire about Australian culture; called ‘Life Support’. I was in love. (Oh, and Brendon Whatsisname was in it too. I can’t remember much of the show now except that Dr Rudi would never be allowed on TV in 2020, I think from memory he was a little bit grabby around the ladies and very racist.)

Abbie, or the future Mrs Marketech as I like to call her, was offering lifestyle advice to the confident ‘outdoorsy’/homeless types. Where to find the best ‘urban camping’ spots, how to scab food – that sort of thing. Like a street-Kardashian.

Thank God she did. Two years of Bear Market ensued after the initial ‘suckers rebound’. Two whole long years. Day after day after day watching the markets fall. Every time you thought you’d jagged the bottom, then another fall. Bear markets are soul destroying.

Where was Abbie whilst the bear market was on? She’d burst into our lives with advice on staying confident about being broke. Now she was gone and I was actually broke. I’m still there plugging away at my keyboard trying to scrape a trade and getting poorer by the day (or ‘broke-er’, which is where the name comes from), when really I should have done the same. Packed up desk and come back once we knew for certain that the WMD’s weren’t real, because human nature saw a 1 per cent chance they were real as a big enough risk to humanity to take some money off the table. Every day. For 2 years.

When the market gets irrational, don’t be irrational. Afterpay isn’t a blue-chip, Boomer-stocks aren’t a thing just because banks aren’t currently going haywire and I can promise you that the market is still a reflection of human nature and its in ‘greed-mode with a liberal splash of fomo’ right now. There may be a big ol’ rebound right now, but there is also a big risk that people remember there’s a death-flu running wild and start focusing on the worst case scenario of that…again. And the Donald starting ‘something war-like’ just to keep in power, just like Dubya did before. (Americans are already becoming boat people to get to Canada.) So I’m not saying to panic, I’m saying to keep a close eye on the charts and the mania because I don’t see a reason to be ‘set and forget’ with your shares just yet.

Once the first bomb dropped in 2003 it only took a year for the market to recover to previous all-time highs. But my soul was broken and any market trust was gone. The markets had changed for the better and I was too shellshocked to take full advantage of the recovery.

What I should have done is what Abbie did. She f%^&ed off when it made sense to do so. She maintained her ‘capital’ and kept a level head. This is when it gets spooky.

In 2003, she’s a bit part in a TV show called ‘Marking Time’. Yep, we sure were.

2004, ‘A Perfect Day’. Full blown bull market by this stage. And ‘Somersault’, yep, was doing them too.

2007 – ‘Elizabeth, the Golden Age’. Great year. The new commodity price paradigm, commodity prices were going to be “Stronger forever” – weren’t they Owen!

2008 – By now, the whole world knew Abbie Cornish. She broke up the marriage of Ryan Phillippe and Reece Witherspoon on the set of…wait for it…’Stop Loss’!!!!! It’s name (not its completely unrelated storyline) foretold the thing we should have been putting into our trading strategies to protect us from the biggest crash of them all (at that time), the GFC.

So, Abbie’s career had closely foretold the market gyrations for 7 years, from 2001 to 2008, more so than any other actor I can think of. But how do you know where to put in a stop loss? (yep, we got there in the end didn’t we! This is about stop-losses.)

At the bottom of the Marketech platform, on the left hand side, we have a few buttons for automatically adding any of the 24 customisable technical indicators to your charts. They are live pricing charts and you don’t pay extra for them. They’re even on your mobile phone!

Average True Range – they say the ‘ATR number times two’ below the current share price is a good spot for a stop-loss as it takes the volatility of the company’s stock into account, so your chances of getting stopped out accidentally due to normal volatility is reduced. The ATR on the XAO right now is about 90, so using the ATR you’d be looking to GTFO of the market around 180 points lower.

Donchian channels – its usually used for ‘breakout’ trades, but can be just as useful as a trailing stop-loss. The channels walk up like a staircase on an upward trend, but if it breaks the bottom of the channel it is failing the trend. Look at the last time the market broke out of the Donchian channel:

Backtested moving averages – sometimes indicators work for certain stocks or markets, so play around with the history of a chart and see if moving average crosses work more often than not. Sometimes they do, sometimes they don’t but checking out historical trends will soon give you an idea. The short moving average and the long moving average highlight short term and long term trends, so when they crossover it tells you that maybe the long term trend is changing.

Bring up the weekly chart on the XAO and look at the times the Moving Average cross would have made you a lot of money, or saved you a lot of money. If you don’t have these charts, go to our website and register for a free trial and see for yourself. On this chart alone you could have made or saved huge dough – and you should see what it is or isn’t saying at the moment…

There are more and more technical-trading based day traders entering the market every day. These Facebook cowboys are trying hard to justify their decisions with technical analysis, and the more people that believe in technical analysis the more likely it is to work – isn’t that awesome! The first person to watch lemmings chase each other off a cliff probably made a lot of money betting against the guys in the pub, until they ran out of lemmings. So a trend is a trend until the bend in the end. Sometimes you buy the dips and sometimes you sell the rallies, but if you don’t learn from history you’ll do the opposite everytime.

So do yourself a favour and get a trading platform with technical overlays on the charts, like ours. Take a break when things get irrational, because you’re a rational trader now. Run with the herd, but not off the cliff. Take profits. Then wait at the bottom of the cliff with a catcher’s mitt.

And keep an eye on the career of the future Mrs Marketech, as she may well still be telling us the future once again. Her latest project is called ‘Secret Bridesmaids Business’, so maybe after 19 years I’m finally in with a chance.

Trade Up to Marketech Focus — a high-function trading platform from $45 per month. Instant trading capability for both PC and mobile to keep you on the move.

As a subscriber you will have access to brokerage starting at $5, and then 0.02 per cent for trades over $25k. Go to www.marketech.com.au to set up a free trial.

This article was developed in collaboration with Marketech Stockbroking Pty Ltd (AFSL 486148), a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.